GET LATEST PASS4SURE 8011 STUDY MATERIALS AND HIGH HIT RATE 8011 CUSTOMIZABLE EXAM MODE

Get Latest Pass4sure 8011 Study Materials and High Hit Rate 8011 Customizable Exam Mode

Get Latest Pass4sure 8011 Study Materials and High Hit Rate 8011 Customizable Exam Mode

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PRMIA 8011 Exam covers a wide range of topics related to credit risk and counterparty risk, including credit analysis, credit ratings, credit derivatives, credit portfolio management, counterparty risk management, and more. The program provides professionals with a comprehensive understanding of the principles, tools, and techniques used in credit and counterparty risk management. 8011 Exam is designed to test the knowledge and skills of professionals in these areas, and those who pass the exam will receive the PRMIA CCRM Certificate.

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Obtaining the PRMIA 8011: Credit and Counterparty Manager (CCRM) Certificate is a valuable achievement for professionals working in the credit and counterparty risk management field. The certificate is recognized globally and demonstrates a candidate’s expertise and commitment to the field. The CCRM certification program and the PRMIA 8011 Exam are highly respected in the financial industry and are often considered a requirement for senior roles in credit and counterparty risk management.

PRMIA Credit and Counterparty Manager (CCRM) Certificate Exam Sample Questions (Q239-Q244):

NEW QUESTION # 239
The CDS quote for the bonds of Bank X is 200 bps. Assuming a recovery rate of 40%, calculate the default hazard rate priced in the CDS quote.

  • A. 3.33%
  • B. 2.00%
  • C. 5.00%
  • D. 0.80%

Answer: A

Explanation:
Hazard rate x Loss given default = CDS quote. In other words, Hazard rate x (1 - recovery rate) = CDS quote.
We can therefore calculate the hazard rate for this problem as 200 bps/(1 - 40%) = 3.33%.


NEW QUESTION # 240
If the cumulative default probabilities of default for years 1 and 2 for a portfolio of credit risky assets is 5% and 15% respectively, what is the marginal probability of default in year 2 alone?

  • A. 11.76%
  • B. 10.00%
  • C. 15.79%
  • D. 10.53%

Answer: D

Explanation:
One way to think about this question is this: we are provided with two pieces of information: if the portfolio is worth $100 to start with, it will be worth $95 at the end of year 1 and $85 at the end of year 2. What it is asking for is the probability of default in year 2, for the debts that have survived year 1. This probability is $10
/$95 = 10.53%. Choice 'b' is the correct answer.
Note that marginal probabilities of default are the probabilities for default for a given period, conditional on survival till the end of the previous period. Cumulative probabilities of default are probabilities of default by a point in time, regardless of when the default occurs. If the marginal probabilities of default for periods 1, 2... n are p1, p2...pn, then cumulative probability of default can be calculated as Cn = 1 - (1 - p1)(1-p2)...(1-pn). For this question, we can calculate the probability of default for year 2 as [1 - (1 - 5%)(1 - 10.53%)] = 15%.


NEW QUESTION # 241
Which of the following are valid methods for selecting an appropriate model from the model space for severity estimation:
I. Cross-validation method
II. Bootstrap method
III. Complexity penalty method
IV. Maximum likelihood estimation method

  • A. I and IV
  • B. All of the above
  • C. II and III
  • D. I, II and III

Answer: B

Explanation:
Once we have a number of distributions in the model space, the task is to select the "best" distribution that is likely to be a good estimate of true severity. We have a number of distributions to pick from, an empirical dataset (from internal or external losses), and we can estimate the parameters for the different distributions.
We then have to decide which distribution to pick, and that generally requires considering both approximation and fitting errors.
There are three methods that are generally used for selecting a model:
1. The cross-validation method: This method divides the available data into two parts - the training set, and the validation set (the validation set is also called the 'testing set'). Parameter estimation for each distribution is done using the training set, and differences are then calculated based on the validation set. Though the temptation may be to use the entire data set to estimate the parameters, that is likely to result in what may appear to be an excellent fit to the data on which it is based, but without any validation. So we estimate the parameters based on one part of the data (the training set), and check the differences we get from the remaining data (the validation set).
2. Complexity penalty method: This is similar to the cross-validation method, but with an additional consideration of the complexity of the model. This is because more complex models are likely to produce a more exact fit than simpler models, this may be a spurious thing - and therefore a 'penalty' is added to the more complex models as to favor simplicity over complexity. The 'complexity' of a model may be measured by the number of parameters it has, for example, a log-normal distribution has only two parameters while a body-tail distribution combining two different distributions may have many more.
3. The bootstrap method: The bootstrap method estimates fitting error by drawing samples from the empirical loss dataset, or the fit already obtained, and then estimating parameters for each draw which are compared using some statistical technique. If the samples are drawn from the loss dataset, the technique is called a non- parametric bootstrap, and if the sample is drawn from an estimated model distribution, it is called a parametric bootstrap.
4. Using goodness of fit statistics: The candidate fits can be compared using MLE based on the KS distance, for example, and the best one selected. Maximum likelihood estimation is a technique that attempts to maximize the likelihood of the estimate to be as close to the true value of the parameter. It is a general purpose statistical technique that can be used for parameter estimation technique, as well as for deciding which distribution to use from the model space.
All the choices listed are the correct answer.


NEW QUESTION # 242
When the volatility of the yield for a bond increases, which of the following statements is true:

  • A. The VaR for the bond increases and its value stays the same
  • B. The VaR for the bond increases and its value decreases
  • C. The VaR for the bond decreases and its value is unaffected
  • D. The VaR for the bond decreases and its value increases

Answer: A

Explanation:
The VaR of a fixed income instrument is given by Duration x Volatility of the interest rate x z-factor corresponding to the confidence level. Therefore as the volatility of the yield goes up, the value at risk for the instrument goes up.
At the same time, the value of the bond is given by the present value of its future cash flows using the current yield curve. This value is unaffected by the volatility of the underlying interest rates. Therefore a change in volatility of interest rates does not affect the value of the bond.
Therefore Choice 'd' represents the correct answer.


NEW QUESTION # 243
Which of the following are true:
I. Delta hedges need to be rebalanced frequently as deltas fluctuate with fluctuating prices.
II. Portfolio managers are right to focus on primary risks over secondary risks.
III. Increasing the hedge rebalance frequency reduces residual risks but increases transaction costs.
IV. Vega risk can be hedged using options.

  • A. I and II
  • B. II, III and IV
  • C. I, II, III and IV
  • D. I, II and III

Answer: C

Explanation:
Delta is non-linear with respect to prices for a number of securities such as bonds, options and other derivatives. It changes with changes in prices, and any hedge initially undertaken becomes quickly mismatched. Therefore delta hedges need to be managed quite actively and kept up-to-date. Therefore I is true.
Primary risks comprise most of the risk in a position, and therefore portfolio managers are right to focus on them over secondary risks. Therefore II is true.The greater the hedge rebalance frequency, the lower is the hedge mismatch at any point in time, and therefore residual risks would be lower. However, rebalancing hedges requires rebalance trades to be done, and these involve transaction costs. Generally, a reasonable balance needs to be struck between the frequency of rebalances (a lower frequency increases residual risk, but this residual risk is not directionally biased) and the costs of rebalancing. III is correct.Vega risk is the risk arising due to changes in prices due to changes in volatility. Options carry vega risk. Therefore any hedges against vega risks can only be obtained using other options positions. (Vega risk may also be hedged using other volatility based products, eg an OTC volatility swap, or a VIX futures type product.)


NEW QUESTION # 244
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